Long-Term Care Insurance and Generic Drug Coverage in Nursing Homes: What You Really Need to Know

Many people assume that if they have long-term care insurance, it will pay for everything that happens when they move into a nursing home - including their daily medications. But that’s not true. Long-term care insurance doesn’t cover prescription drugs, not even generic ones. This is one of the most misunderstood parts of the policy, and it can leave families scrambling when a loved one needs daily pills for blood pressure, diabetes, or dementia.

Think about it: someone moves into a nursing home because they can’t manage daily tasks anymore. They need help bathing, eating, and moving around. The insurance kicks in to cover room and board, personal care, and maybe even physical therapy. But when the nurse hands them their morning meds - a generic version of lisinopril, metformin, or donepezil - that’s not covered by long-term care insurance. It’s covered by something else entirely. And if that something else isn’t in place, the resident pays out of pocket.

Why Long-Term Care Insurance Doesn’t Cover Drugs

Long-term care insurance was never designed to pay for medical treatments. It’s meant to cover custodial care - the kind that helps people live with daily life when they’re no longer able to do it themselves. That means help with dressing, toileting, feeding, and mobility. It’s not about curing illness. It’s about managing it.

Prescription drugs, even generics, are considered medical care. That’s why they fall under health insurance, not long-term care coverage. The California Department of Insurance makes this clear: policies cover skilled, intermediate, or custodial care - not doctor visits or medications. Triage Health puts it bluntly: “Even if you live in a nursing home that’s covered by your long-term care insurance, the prescription drugs you take will be covered by your health insurance.”

This separation isn’t new. It’s been the rule since long-term care insurance became popular in the 1970s. But things got more complicated in 2006, when Medicare Part D launched. That’s when the system for paying for drugs in nursing homes changed dramatically.

Medicare Part D Is the Main Payor for Nursing Home Drugs

Today, 82.4% of prescription drugs in nursing homes are paid for by Medicare Part D. That’s nearly 4 out of every 5 pills. The next biggest payer? Medicaid, at 11.2%. Private insurance? Just 8.5%. And a shocking 8.9% of residents - nearly 1 in 10 - pay for their meds themselves or get temporary help from charity programs.

Part D plans cover both brand-name and generic drugs. But they charge less for generics. That’s intentional. Generic drugs make up about 90% of all prescriptions in nursing homes, but only cost 25% of the total drug spending. So the system is built to push people toward cheaper, equally effective options.

But here’s the catch: every Part D plan has its own formulary - a list of approved drugs. If a resident’s medication isn’t on that list, the pharmacy won’t fill it. And getting an exception can take time. CMS requires plans to respond to non-formulary requests within 72 hours for nursing home residents, but delays still happen. And if the resident doesn’t have a plan at all? They’re stuck paying cash.

How Nursing Homes Manage Drug Coverage

Nursing homes don’t just hand out pills. They’re now pharmacy managers. Every time a new resident arrives, staff must figure out:

• Which Part D plan they’re enrolled in
• Whether the facility’s pharmacy works with that plan
• What drugs are covered under the plan’s formulary
• How to request exceptions if a needed drug isn’t listed

A 2019 survey found that 78% of nursing homes spend 10 to 15 hours a week just managing drug coverage issues. That’s over $28,500 a year in staff time per facility. And it’s not just paperwork - it’s phone calls, faxes, appeals, and constant coordination with pharmacies and insurance companies.

Facilities that use electronic systems that connect directly to multiple Part D plans cut down delays from an average of 3.2 days to just 0.7 days. That’s the difference between a resident getting their meds on time - or going without for days, risking a hospital readmission.

Who Pays When There’s No Coverage?

There are two main groups at risk: dual-eligible beneficiaries and those who never enrolled in Part D.

Dual-eligible residents - those on both Medicare and Medicaid - get their drugs through Part D. But if they’re not properly enrolled, or if their plan doesn’t work with the facility’s pharmacy, they’re left in limbo. And then there are the 8.9% who have no coverage at all. These are often people who thought long-term care insurance would cover everything, or who couldn’t afford Part D premiums.

Dr. David Grabowski from Harvard Medical School says the “donut hole” - the coverage gap where beneficiaries pay more out of pocket - still hurts some residents. Even though the Inflation Reduction Act of 2022 caps out-of-pocket drug costs at $2,000 a year starting in 2025, many residents still face high costs before that cap kicks in.

And rural areas are worse off. A 2022 study found that 22% of rural nursing homes struggle to find pharmacies that contract with all major Part D plans. Urban facilities have more options. Rural ones? They might only have one pharmacy willing to work with them - and if that pharmacy doesn’t carry a needed drug, the resident waits.

What Families Should Do Now

If you or a loved one is moving into a nursing home, here’s what you need to do:

1. Confirm which drug plan they’re enrolled in - Medicare Part D, Medicaid, or private insurance.
2. Ask the facility: “Which pharmacy do you use, and does it work with our plan?”
3. Request a copy of the plan’s formulary. Check if all current medications are covered.
4. If a drug isn’t covered, ask how to file an exception request. Start this process before moving in.
5. Don’t assume long-term care insurance covers meds. It doesn’t.

And if someone doesn’t have Part D? Enroll them immediately. Late enrollment penalties can be avoided if they qualify for special enrollment periods, especially after moving into a nursing home.

The Bigger Picture

The system works - mostly. Medicare Part D has dramatically reduced out-of-pocket drug costs for nursing home residents. Before 2006, 13 million Medicare beneficiaries had no drug coverage. Today, that number is down to less than 10%.

But the system is fragmented. There are 27 Part D plan sponsors in the market, and the top five control 78% of the business. That means formularies vary wildly. One plan might cover a generic version of memantine for dementia. Another might not. A resident switching plans - or moving to a new facility - could lose access to a drug they’ve been taking for years.

Experts warn that without stronger oversight, formulary restrictions could become a hidden barrier to care. Generic drugs are safe, effective, and cheap. But if a plan refuses to cover them - or makes exceptions too hard to get - patients suffer.

The future looks better. By 2028, Medicare Part D’s share of nursing home drug spending is expected to rise to 85.2%. Out-of-pocket payments should drop below 7%. But that only happens if enrollment stays high, pharmacies stay connected, and regulators keep pushing for fairness.

Long-term care insurance is a valuable tool. But it’s not a magic wand. It doesn’t cover drugs. And if you don’t understand that, you could end up paying thousands more than you expected - just for pills.